Shaky Project Financing is Returning

Just yesterday I was discussing why general contractors need to ensure that their clients have proper funding to support a project. If the owner is not properly funded, then the general contractor is at risk of not being paid for performed work. After that lecture, I read an article in Bloomberg about how risky lending is back for office, mall and hotel projects. The increase in interest only (IO) and part ion IO lending is on the rise.

If the project owner has financing, regardless of the type, that's good for contractors and issues with shaky financing may not be an issue until after the project is completed and principle payments or the balloon payment is due. But contractors should still be aware of the type of project funding mechanism and the financial strength of the owner and bid projects accordingly. Be very weary of owners with weak financial backing.